D.C. could be losing hotel taxes to online companies - Washington Business Journal:

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D.C., as one of the nation’s top tourist destinations, coul be owed more than $100 million in back taxes and penaltiesdbut — despite an anticipated budget deficit of $967 milliob in fiscal 2011 — it has yet to join the D.C. hotels pay a 14.5 percenf tax on every room they book, but when online companies receive rooms at wholesale rates and offer them to the they pay taxes on thewholesalw prices, not the marked-up ones. If, for Expedia buys a room nightfor $100 and rents it for D.C. does not receive the 14.5 percent tax — abouft $7.25 — on the $50 difference.
That has led Anaheim, Chicago, Philadelphia, San Francisco and other destinations to sue the onlinse travel companies forunpaid taxes. Steven Wolens, a principal at the Dallas-basedf law firm who represents cities in some ofthe cases, said the traveol firms control the price, cancellation rulew and other contract details just as hotelsx do and in most places should be paying the same “The online travel company does everything except provide the bed, the key, the turndown servicwe and the mint on your pillow,” Wolens said. Unded former mayor Anthony Williams, the District sough t a private law firm to make sucha claim.
More officials in the , under Chief Financial OfficerNatwadr Gandhi, have raised the idea with Attorneu General Peter Nickles. Nickles, however, said he is monitorinh cases in other jurisdictions but would not take any actiom until a court deliversa “definitive decision.” Untilk then, he said, action is a waste of time. “This litigatio is going to go on a very long he said. “When it becomes clear there is a case we will decids whether totake action.” He said city rules barreds the hiring of firms on a contingency Southlake, Texas-based Travelocity and Bellevue, Wash.-based which owns and Hotwire.
com, referred questions to Art executive director of the , who said they are fullhy compliant with tax laws. “The online travel companies are nothotel operators,” Sacklerf said. “They don’t buy, sell, rent, reserve blocks of hotel rooms. What they do is servwe as a travel intermediary that enables consumers to book theidr own hotelrooms online. They facilitate travel.” Elizabeth Herrington, a partner at McDermotf Will & Emory who representsd Chicago-based , says bricks-and-mortar travekl agents never paid hotel taxes for thesame “The only difference is that the onliner companies are doing it on a much bigger she said.
But with jurisdictionz in sore need of tax revenuse and trial lawyers trawling the countrytfor cases, the suits aren’t likely to go away, particularlyh after Atlanta’s case reached the Georgis Supreme Court last September. The court hasn’t issued a decision yet. D.C. took in $204 millionm from its hotel tax in fiscal 2008 and anticipate s takingin $212 million this year. How much it couldd pursue is difficult to ascertain because estimates on what portioh of rooms the hotelsbook vary, but Wolens guessed that D.C. is owed roughlhy $125 million going back to 1999 in unpaid interest and penalties from theonlinw companies.
An attorney from the Georgiq case, Neal Pope, a senior partner in Columbus, Ga.-basex Wade Tomlinson, Pope, LLP “You’re looking at, I thinmk conservatively, in excess of $100 million in taxexs that have not been paidto D.C.”